There is a ‘resurgence’ in agriculture, says report

The farming sector is in reasonably good health — but Brexit, CAP reform and climate change could change the picture.

In the economic letter on Irish Agriculture: Economic Impact and Current Challenges, Central Bank economist Thomas Conefrey said that, in contrast to the two decades from 1990, since 2010 “Irish agriculture has experienced something of a resurgence”, led by the removal of milk quotas in 2015.

According to the report: “Since 2010, the overall value of gross output has increased by 46%; in volume terms output has risen by 21%.”

The volume of dairy output rose by 29% between 2014 and 2017, although it added that according to Teagasc, a combination of weather-related cost increases as well as lower milk prices mean 2018 is likely to result in a reversal of the strong income gains experienced in 2017.

Data from the CSO shows the agri-food sector accounts for just under 7% of overall gross national income. It also highlighted the importance of agriculture in some areas, such as in the Border, Midland and West areas, around one in eight jobs is in the agri-food sector compared to around one in 12 nationally.

But it also warned: “Low profitability of some farming activities leaves the sector exposed to potential negative shocks such as Brexit or possible future reductions in the CAP budget.

Last year, dairy accounted for one third of agricultural output, followed by cattle and crops. However, CAP payments are vital to the sustainability of many farms, with figures from Teagasc, showing the average total CAP payment received per farm in 2017 was €17,659, or 56% of average farm income. Teagasc has reported that 30% of the farm population are classed as being economically vulnerable.

The report cites the Teagasc National Farm Survey (NFS) showing that around two thirds of farms have no farm business-related debt, but 60% of dairy farms have debt, compared to one third of cattle farms.

However, while dairy farms have the highest level of borrowings, their debt-to-income ratio is the lowest. Agriculture as a sector also has the lowest level of default, compared with other sectors of the economy.

When it comes to the challenges facing agriculture, one is profitability. In 2017, average family farm income across all farm enterprises was €31,411 while on dairy farms, the average income was almost three times that, at €86,069. On cattle farms, income was half the national average.

The spectre of Brexit also looms large: Irish food exporters remain heavily dependent on the UK, particularly subsectors such as beef, where around half of the country’s beef exports go — making it “particularly vulnerable”.

A hard Brexit scenario would likely mean agricultural produce attracting some of the highest tariffs and according to the report: “The imposition of tariffs of this magnitude has the potential to significantly reduce Ireland-UK trade in agricultural goods.

The UK departure from the EU will also affect CAP payments, viewed as another threat to Irish farm enterprises.